Cheers! EPFO subscribers will now get mutual fund units

The Employees' Provident Fund Organisation (EPFO) on November 23 cleared a new accounting policy for its equity-linked investments.

Under the policy, the 15 per cent of PF contributions parked in equities will be allotted as mutual fund units to all the subscribers.

These units can be redeemed by subscribers when they exit or withdraw the accumulated money.

The EPFO has been investing in equities for over two years, but there was no consensus on how the gains from this would be passed on to investors.

It has now decided this will be done by allocating units to each subscriber.

"Now, a subscriber will know exactly how much of his money is in debt and how much in equity, as they will start getting units of their equity portion by March," said Manoj Nagpal, chief executive officer, Outlook Asia Capital.

Senior officials in the sector said the withdrawal norms remained the same and subscribers can't redeem their money whenever they want.

They can partially withdraw their money if they need funds for marriage, education for self or children, construction of house and a few other reasons.

What will help subscribers is that they can choose the portion from which they wish to withdraw.

For example, if the withdrawal is being made during a bull run, the 15 per cent portion can do extremely well in comparison to the debt portion, and investors can choose to encash some of this profit or vice versa.

There is still no clarity on how long the subscriber can hold the units after retirement.

"We need to wait for the fine print on the issue. Though it is reported in the media that subscribers can continue to hold units for three years after their retirement, but are yet to get some clarity from EPFO," said a financial planner from Mumbai.